Etihad chief counters US carrier claims

Etihad Airways has urged the US Government to ‘keep the skies open’, in a comprehensive formal response to the joint campaign by Delta Air Lines, United Airlines and American Airlines to block competition and roll back the benefits of Open Skies.

Etihad chief James Hogan.

The Etihad Airways response, which has now been submitted to the US Department of State, the US Department of Transportation and the US Department of Commerce, emphasises the many benefits delivered by Open Skies to consumers, to American workers, to US carriers and to US trade and tourism.

It also categorically refutes claims made by the Big Three carriers about Etihad Airways’ finances, giving a clear and compelling explanation that the equity funding and shareholder loans provided by the Government of Abu Dhabi, by way of investing in a successful business model, fully comply with the US-UAE Air Services Agreement and all other applicable rules.

In a letter supporting the airline’s formal submission, James Hogan, Etihad Airways president and chief executive officer, said Etihad Airways “did not seek this fight”.
“We focus on making money by providing world class, innovative, re-imagined and value-for-money product and services to our guests,” he asserted.

Etihad Airways’ submission includes detailed information about the airline, its financial strategy and its business performance.

Since 2003, the Government has invested $14.3 billion in Etihad Airways; of this amount, $9.1 billion was provided in equity funding and a further $5.2 billion was provided in shareholder loans.

The submission also outlined how Etihad Airways receives no Government subsidies or sovereign guarantees and, “contrary to the claims of some competitors, it does not receive free or discounted fuel or airport services in Abu Dhabi, its home and global hub”.

Etihad Airways’ submission includes the example of routes to the Indian sub-continent to explain the inaccuracies of the Big Three’s arguments. The submission states:

“Their only specific claim is that from 2008 to 2014, they have allegedly collectively lost five percentage points of their market share to the Indian subcontinent. However, what they neglected to mention is that during the same period their passenger numbers actually grew by 18 per cent. So while their collective market share actually went down by a relatively insignificant 4.4 percentage points (not 5 percentage points), their actual passenger volumes grew by over 18 per cent, or over 250,000 passengers, including both economy and premium classes. This passenger growth clearly demonstrates the power and effects of Open Skies and liberalized traffic rights.

“The Big Three carriers affirmatively and voluntarily choose not to directly serve Etihad’s key Middle East and Indian Subcontinent markets in a meaningful way. Instead they are routing US passengers through congested European hubs and on to their European alliance partners to serve certain destinations. Indeed, the Big Three carriers’ campaign is little more than a regulatory attempt to further cement their oligopoly, particularly on transatlantic markets.”

Hogan added that facts, not myths, should define the debate, saying: “These airlines criticise us for being Government-owned – but government stakes in airlines are completely normal around the world. The majority of airlines in the global alliances, which the Big Three dominate, are owned or controlled by governments or government-owned entities. Just this month, the French Government increased its shareholding in Air France.

“The Big Three criticise us for receiving Government investment. We have never made any secret of the fact that we have received equity funding and shareholder loans, which again is not unusual for airlines, or indeed for many businesses. These investments received from our shareholder are not like the more than $70 billion the Big Three have received from US Government sources or court-approved processes since 2000 alone, a fact shown in a study by The Risk Advisory Group.

“The Big Three say our services threaten competition. Yet a report by independent analysts the Edgeworth Group shows that our services actually stimulate traffic flows, which have increased overall passenger numbers on those routes for airlines including the Big Three and their alliance partners.

“The Big Three say we threaten American jobs. Yet their campaign seeks to limit the operations of Etihad Airways, which according to Oxford Economics will support 23,400 American jobs this year, and almost double that number by 2020.

“And finally, the Big Three have spent millions of dollars trying to influence politicians on the supposed threats from the Gulf carriers, yet their report mentions consumer choice only once – even then in a cursory manner.”